BIR appoints two to chair positions

Brussels-based Bureau of International (BIR) President Ranjit Baxi has announced the appointment of chairs for the association’s Communications Committee and Convention Committee. The new positions take effect March 1, 2018.

Named to head BIR’s Communications Committee is Mark Sellier of OneSteel Recycling Hong Kong Ltd. He replaces Kamiel van Wijk. In announcing the appointment, Baxi says Sellier has been an active member of BIR for years and previously was chairman of BIR’s Convention Committee.

The Convention Committee will be chaired by Murat Bayram of European Metal Recycling Ltd. (EMR), who has been active on the BIR Non-Ferrous Metals Division board since November 2015. Bayram also is an active member of the German recycling federation VDM. In naming Bayram to the position, Baxi stressed the strategic importance of the Convention Committee, which helps determine future convention venues, formats and programs.

Trump tariff talk stirs markets

An announcement made by President Donald J. Trump Thursday afternoon (United States time), March 1, 2018, that he fully intends to impose tariffs on imported steel and aluminum greeted metals producers and traders in the rest of the world as they awoke on Friday morning, March 2.

Trump’s announcement was cited as the cause of a sell-off in the New York Stock Exchange and provoked numerous reactions and comments in North America and beyond. According to CBS News, the president “summoned steel and aluminum executives to the White House” March 1 and stated, “We'll be signing it next week,” regarding an executive order imposing new tariffs. Trump reportedly added, “You’ll have protection for a long time, in a while.”

One Hong Kong-based scrap trader, who requested anonymity, noted that while China is pointed to most frequently as the problem by campaigning politicians, an analysis he read “suggests that it may be Canada, Germany, Japan and South Korea, all close allies of the United States, who will suffer most.”

Reactions from Canada and Europe have been strong, but coverage of the tariffs by the China Daily, considered closely aligned with the Beijing government, indicates China was responsible for just 2 percent of the imported steel shipped into the U.S. in 2017.

Shanghai-based investor John Browning of BANDS Financial, who spoke at the May 2017 Bureau of International Recycling (BIR) World Recycling Convention in Hong Kong, observes in his daily dispatch to customers that “In the popular press this morning [in China], the Trumpian trade tariffs news was placed below ‘China, Tonga agree strategic partnership.’ This may reflect the fact that in China these tariffs may largely be a nonissue.”

Figures for 2017 published by the Washington-based American Iron and Steel Institute (AISI) show China shipped less finished and semifinished steel into the U.S. in 2017 than it did in 2016, and the 813,000 metric tons it shipped were surpassed by Brazil (987,000), Taiwan (1.2 million), Germany (1.4 million), Japan (1.5 million), Turkey (2.2 million) and South Korea (3.7 million).

Some industry observers do express concern that much of the steel recorded as coming from South Korea and Taiwan may be produced in China and is shipped via those two nations (and possibly via Canada) on its way to the U.S.

All those nations’ figures are topped by Canada, which in 2016 shipped more than 5.5 million metric tons of steel to the U.S.

The U.S. consumed about 6 million tons of aluminum in 2017, according to the U.S. Geological Survey (USGS), but produced just 740,000 tons of primary aluminum. “Even if they re-start idled lines, they could push it to about 1.5 million,” says Shah, who also is an officer with the Metal Recycling Association of India (MRAI). Adding that to the 3.7 million tons of secondary production, the U.S. would still be a net importer of finished or semi-finished aluminum.

“So, the U.S. has no alternative but to import, and in the process make consumers pay more for cars, cans, conductors, etc.,” states Shah. “It will create a handful of jobs (aluminum production is labor light), but it’s the American consumers who will have to foot a huge bill. I do understand that Mr. Trump wants to revive American manufacturing and create jobs. But my hope is [this] overzealousness does not end up making American consumers pay through their nose. The math is simply missing here.”

At least one China-based critic appeared in the form of the China Nonferrous Metals Industry Association (CNIA), which includes as an affiliate the Metals Recycling Branch (CMRA). CNIA VIce Chairman Wen Xianjun was quoted by Bloomberg as saying the U.S. measures “overturn the international trade order” and that “other countries, including China, will take relevant retaliatory measures.” Bloomberg also quoted a China Iron and Steel Association (CISA) officer as calling the move “stupid.”

The Hong Kong trader also questions the use of America’s Section 232 national security measure as a means of imposing the tariffs. “He’s using a national security investigation from last year and invoking a loophole in international trade rules allowing restrictions in times of war. Is he bringing in the measures for political gain to stimulate the domestic economy and U.S. labor market, or is he preparing for something more serious or just hedging both bets?”

He concludes, “Any way you look at it, if he signs off on the order, other countries will follow [with measures of their own].”

Also questioning the Section 232 approach has been Mexican steel industry association CANACERO, which has stated the proposed tariff “would affect various chains of production, attempting to [unwind] NAFTA’s (North American Free Trade Agreement's) integration objectives.”

In addition to the New York stock sell-off, on the Shanghai Futures Exchange on Friday morning, March 2, most aluminum contracts were trading higher, while copper and steel rebar pricing were moving lower.

Closer to home, Trump’s announcement was greeted with skepticism by several Republican Party elected officials in the U.S. According to CBS News, Sen. Orrin Hatch said the Trump advisors who pushed for the tariffs “ought to be reprimanded” because the new tariffs are “not going to help America.”

Sen. Ben Sasse of Nebraska, a Republican like both Trump and Hatch, called the move “leftist economic policy” when contacted by CBS, adding that the U.S. had “tried it a bunch of times over the last two centuries, and every time American families have suffered. It is bad policy.”

Exactly what will be included in the measure President Trump intends to sign the week of March 5-9 is not yet final. The U.S. Commerce Department has suggested different ways to impose tariffs on imported steel and aluminum, including tariffs of 24 percent on all steel and 7.7 percent on aluminum imports applied to all nations equally; or higher tariffs on 12 targeted countries, including Brazil, China, Russia, Hong Kong, Venezuela and Vietnam; or quotas limiting countries to either equal to or less than what they shipped in 2017.

The BBC and New York Times have reported the president is backing tariffs that will involve imported finished and semi-finished steel facing a 25 percent rate while aluminum will see a 10 percent tariff imposed. News outlets were unclear whether those tariffs will apply to all nations or only selected ones.

Leaders from around the world did not hesitate to question the decision. European Commission President Claude Juncker commented, “Protectionism cannot be the answer to our common problem in the steel sector. We will not sit idly. The EU Commission will bring forward in the next few days a proposal for World Trade Organization (WTO)-compatible countermeasures against the U.S. to rebalance the situation.”

“Should restrictions be imposed on Canadian steel and aluminum products, Canada will take responsive measures to defend its trade interests and workers,” Canadian Foreign Minister Chrystia Freeland was quoted as saying by political website The Hill. Regarding the use of Section 232 in the measure, she added, “It is entirely inappropriate to view any trade with Canada as a national security threat to the United States.”

The president of MillerCoors Brewing took to his Twitter account to say, “American workers and American consumers will suffer,” adding the company has been “selling an increasing amount of our beers in aluminum cans, and this action will cause aluminum prices to rise.”

Bio Pappel US paper mill plans delayed

The McKinley Paper Co. subsidiary of Mexico-based Bio Pappel has reportedly pushed back its plans to reopen a paper mill in the United States Pacific Northwest that it purchased in March 2017.

Plans to retrofit the mill in Port Angeles, Washington, mill have been “put on hold,” according to an online article posted by the Peninsula Daily News. The retooling project involved converting the mill from one that made graphic paper, including paper for phone directories, to one that produces linerboard.

The mill, formerly owned by Nippon Paper Industries USA, had been targeted for a reopening before the end of 2018, but a McKinley Paper vice president quoted by the media outlet stated, “That’s not going to happen,” and added, “things are happening in the market” to cause the delays.

McKinley and Bio Pappel continue to operate a plant in Pruitt, New Mexico, in the U.S. that produces recycled-content linerboard.

When Bio Pappel acquired the Port Angeles plant in early March 2017, it stated the purchase would allow it to double its production capacity in the U.S.

“McKinley will convert the production of this plant to its business line to efficiently integrate it with its current operations in the U.S., which will allow it to strengthen its presence and competitiveness, as well as capture the opportunities of the new cycle of economic expansion expected by a significant reduction of taxes on businesses, an investment-intensive infrastructure and extensive industrial and financial deregulation, announced in that country,” the company’s March 2, 2017, news release stated.

“We consider that Bio Pappel is one of the companies best positioned to insert competitively into a new business environment where international paradigms are changing,” said Miguel Rincon, Bio Pappel’s general director and board chairman when announcing the purchase. “The company is convinced that Mexico, the United States and Canada are globally the best region to invest in, with or without the Free Trade Agreement.”

Bio Pappel produces several types of paper, including newsprint, corrugated cardboard graphic papers and kraft sacks at more than 40 plants in Mexico, the U.S. and Colombia. The company also operates 13 recycling centers for recycled fiber.

The U.S. Environmental Protection Agency (EPA), Washington, has began cleanup of a recycling facility that house potentially toxic light bulbs and other hazardous waste. Two to 3 million spent fluorescent bulbs, 250 drums of polychlorinated biphenyl- (PCB-) containing lighting ballasts and other electronic equipment were stored at the former Fluorescent Recycling Inc. warehouse in Cleveland.

Though called a recycling facility, the plant seems to have operated mainly as a storage facility until a fire in mid-February 2018. The Cleveland fire department notified the Ohio EPA about the stored items at that time. The Ohio agency contacted the U.S. EPA to warn about the potential threat of the facility to the public. The EPA determined the facility was contaminated with mercury vapors and PCBs.

According to a U.S. EPA news release, the agency will address the hazardous contamination accumulated throughout the entire warehouse. and will provide technical assistance to the Cleveland Fire Department.

The owner has now provided U.S. EPA with access to the warehouse for what the agency calls "a Superfund time-critical removal action to remove contaminants." Fluorescent Recycling Inc. historically operated as a spent fluorescent lighting waste transporter, according to the agency.

Eric Pohl, an EPA on-scene coordinator, says in an online report on Cleveland.com that the air quality is not a threat to the area surrounding the warehouse and the EPA is monitoring and testing the air quality daily. Officials are removing the lamps and PCBs because they contain mercury, which can be harmful when inhaled or absorbed through the skin.

Pohl says in the report there is no timeline on the cleanup’s completion.

Tepid demand for copper

Continuing a trend that began in the fourth quarter of 2017, copper scrap dealers are seeing extended delivery dates from their domestic consumers as supply outpaces demand. This situation, as well as softer export buying, is contributing to the wider spreads recyclers are reporting.

Moving, though slowly

The nonferrous marketing manager for a scrap processing company based in the Midwest says that while U.S. copper scrap generation varies by grade, it has been increasing generally.

“Higher terminal market pricing in conjunction with China backing away from the copper market has certainly increased domestic supply on the copper commodities,” he says.

Generation from the demolition and construction sectors is stronger than the marketing manager has seen in the past few years. “Capital investments being made by domestic manufacturing companies to replace and upgrade older equipment are generating increased scrap. The material pickup is seen across the board, from increasing scrapped out CNC (computer numerical control) machines to entire plant demolitions,” he says.

The chief operating officer for a scrap processing company based in the Northeast says obsolete generation is about where he would expect to see it in the Southeast region, which is where he is based. “It is probably a little bit above where we would be traditionally.”

He attributes the increase in obsolete supply to the upward trend in COMEX pricing for copper, which he says is spurring more interest in the metal.

ISRI, citing American Metal Market data, states “the discount on No. 2 copper scrap delivered to U.S. refineries stood at around 42-43 cents per pound in early December 2017. In comparison, the spread on No. 2 copper scrap was around 17-19 cents in June 2016.”

The association also mentions that “scrap market participants are questioning whether terminal market copper prices reflect physical market fundamentals or speculation,” which has been fueled in part by China’s clampdown on scrap imports and expectations that its consumption of copper cathode and other forms of refined copper will increase as a result.

A broker based in the Midwest also points to steady generation of obsolete material. However, he adds that “you can’t match it up” on the demand side. “No. 1 copper is hard to find, but I have demand for it, while bare bright is everywhere, but I can’t get mills to take it.”

He adds that “chops are everywhere” and that the domestic market has been unable to keep up in terms of demand.

More generally speaking, the source in the Southeast says, “Demand is good, but supply must be better than demand.”

Delivery appointments for copper scrap have not been readily available, he says, though—at three weeks to 30 days—they are not as far out as they were in the fall.

“Otherwise,” he says, “higher copper markets have caused an increased amount of supply to enter the market, thus driving pricing down. But we believe the wider spreads to be a result of increased supply amid steady demand.”

The marketing manager continues, “We believe that commodities like bare bright will see demand pick up as the Chinese consumers are forced to compete or pay up for cathode or equivalently clean copper units.”

As of mid-January, the broker characterizes demand from domestic consumers as being lower, adding that consuming facilities are not running at 100 percent. “They are generating enough return scrap to get what they need,” he says.

It is common to see a seasonal depression in copper scrap demand going into the end of the calendar year, says the nonferrous marketing manager. “Although we did not see much of a pickup in January, indications are that demand will pick up in February and remain strong through the spring and summer.”

He adds, “Consuming facilities are reporting lower than anticipated sales for finished goods at the moment, but order books appear to be quickly improving.”

The export picture

Export buying activity has been mixed, the marketing manager says. “Understandably, our Chinese customers have been unable to purchase the same materials they had been over the past several years, but other consumers have emerged.

“In recognition of the transition that is occurring from Chinese consumers moving to other countries, the Indians have been aggressively attempting to gain market share,” the marketing manager adds.

According to AMM, the Chinese government has issued the first two rounds of solid waste import licenses for 2018, and copper scrap import license numbers and tonnages are down by more than 94 percent each.

The marketing manager says these reductions are a “temporary inconvenience.” He adds, “China has taught the rest of the developing world a valuable lesson as it pertains to acquiring affordable raw materials through the leveraging of their labor markets. We are already seeing several customers moving operations to other countries where there is a high demand for materials and low costs of labor.”

As a result, the marketing manager says, “We are still moving many of the commodities that we had been, just delivering to different ports.”

When asked if his company has made any adjustments to its operations in response to China’s harder line on scrap imports, he says, “Any changes that we have made are simply to process materials further as opposed to selling as-is.”

He adds that this decision is driven by economic considerations. “If a market for material in one form disappears, we will process the material further until we have a saleable commodity yielding the highest margin available.”

The source based in the Southeast says his company has been shipping very little material to China, though he adds that it did send a load of motors there as well as one load of birch/cliff in January.

Transportation woes

In addition to the widening spreads recyclers are dealing with, rising transportation costs associated with the shortage of trucks and drivers are eating into the margins of copper scrap dealers.

“The shortage is certainly being seen on the pricing being offered by transportation companies,” the marketing manager says. “As of now, we are paying considerably more to move material, but have not ultimately had many issues securing transportation if you are willing to pay the going rate.”

The source based in the Southeast says the higher prices and tightness in the trucking sector have only gotten worse since the initial disruptions caused by the hurricanes in Texas and Florida. He points to regulations requiring drivers to electronically log their hours that went into effect in mid-December of 2017 as the primary reason. He says his company is double-booking trucks just to be sure it gets service.

“It’s not a bad thing,” he says of the new requirements, “but it will take a while for the market to adjust.”

The Midwest-based broker also blames the hours-of-service regulations for the tightness in the trucking market and the rising prices. He says he’s seen trucking rates double. “It is going to turn into instant inflation because products are going to start costing more,” the broker says.

Despite the challenges currently facing copper scrap dealers, the marketing manager based in the Midwest remains “cautiously optimistic.” He says, “We believe that we will see a higher average price for the red metals as compared to 2017; however, domestic mill demand remains in question. If order books continue to build, and the Chinese economy remains strong, then we believe that we will see spreads come in considerably.”

An extended version of this article, with additional information, appears in the February 2018 print edition of Recycling Today, and can be viewed online here.